1. PROJECT ON CHARACTER ETHICS OF NESTLESUBMITTED TO MRS. ANSHIKA RAJVANSHISUBMITTED BY PRASHANT KR.ROY BBA 3RD SEM 00413401711IDEAL INSTITUTE OF MANAGEMENT AND TECHNOLOGY

2. INDEX CERTIFICATE ACKNOWLEDGEMENT CHAPTER -1 INTRODUCTION OVERVIEW PROFILE PROBLEMS CHAPTER -2 RESEARCH METHODOLOGY SIGNIFICANCE OBJECTIVE SCOPE OF STUDY CHAPTER -3 CONCEPTUAL DISCUSSION OR COMPARSION CHAPTER -4 DATA ANALYSIS CHAPATER 5 FINDINGS & RECCOMENDATIONS CHAPTER 6 3. LIMITATIONS CONCLUSION BIBOLIOGRAPHY 4. GUIDES CERTIFICATEI have the pleasure to certify that PRASHANT KR. ROY a studentof IDEAL INSTITUTE OF MANAGEMENT &TECHNOLOGY, NEW DELHI has pursued his research work and prepared the CHARACTER ETHICS OF NESTLE, under my supervision and guidance . The work is the result of this own research to the best of my knowledge. This is submittedto the InstituteforIntegratedbeingin LearningManagement for the Partial fulfillment of the requirements of the three year full- time degree in BBA.Guides Signature Mrs.ANSHIKA RAJVANSHI 5. ACKNOWLEDGEMENT The study was conducted by the assistant of several individuals. I really appreciate their help and hereby thank them. I would like to give special thanks to the following people: Firstly, I would like to thank MRS. ANSHIKA RAJVANSHI who had supervised the study and was in charge of the entire project. Her presence and assistant was remarkable and so I am grateful to her. Secondly, I would like to thank the officials who were interviewed. They took out time from their busy schedules to help me proceed with my study. Their assistance was very significant and so I am grateful to them as well. Thirdly, I would like to thank all other people who provided me with the resources to conduct my study. Their help and assistance was very valuable and so I would like to acknowledge them as well. Overall all the above mentioned people had a great role in my study. Their direct and indirect help indeed proved to be help. PRASHANT KR. ROY BBA 3RD SEM. 00413401711 6. SCOPE OF THE STUDY As learning is a human activity and is as natural, as breathing. Despite of the fact that learning is all pervasive in our lives, psychologists do not agree on how learning takes place. How individuals learn is a matter of interest to marketers. They want to teach consumers in their roles as their roles as consumers. They want consumers to learn about their products, product attributes, potential consumers benefit, how to use, maintain or e v e n d i s p o s e o f t h e product and new ways of behaving that will satisfy not o n l y t h e consumers needs, but the marketers objectives. The scope of my study restricts itself to the analysis of consumer preferences, perception and consumption of Cadbury and Nestle Chocolates. There are many other brands of chocolates available but my study is limited to two major players of chocolates leaving behind the others. The scope of my study is also restricts itself to Ambala region onlyOBJECTIVES OF THE STUDY 7. This project is based on the comparative study consumer behavior towards Nestle and Cadbury chocolates. Objectives of the study are: The other objective is to know about the customer s a t i s f a c t i o n l e v e l associated with the product and the customer preference level. To increase customer satisfaction and recapture the market share by fulfilling the customer needs. To study the factors affecting the consumption patterLIMITATIONS OF THE STUDY In attempt to make this project authentic and reliable, every possible aspect of the topic w a s k e p t i n m i n d . N e v e r t h e l e s s , 8. despite of fact constraints were at play during the formulation of this project. The main limitations are as follows: Due to limitation of time only few people were selected f o r t h e s t u d y . S o t h e sample of consumers was not enough to generalize the findings of the study. The main source of data for the study was primary data w i t h t h e h e l p o f s e l f - administered questionnaires. Hence, the chances of unbiased information are less. People were hesitant to disclose the true facts. The chance of biased response cant be eliminated though all necessary steps were taken to avoid the sameINTRODUCTION Nestl was founded in 1866 by Henri Nestl and is today the worlds biggest food and beverage company. Sales at the end of 2005 were CHF 91 9. bn, with a net profit of CHF 8 bn. Nestl employ around 250,000 people from more than 70 countries and have factories or operations in almost every country in the world. The history of Nestl began in Switzerland in 1867 when Henri Nestl, the pharmacist, launched his product Farine Lacte Nestl, a nutritious gruel for children. Henri used his surname, which means little nest, in both the company name and the logotype. The nest, which symbolizes security, family and nourishment, still plays a central role in Nestls profile. Since it began over 130 years ago, Nestls success with product innovations and business acquisitions has turned it into the largest Food Company in the world. As the years have passed, the Nestl family has grown to include chocolates, soups, coffee, cereals, frozen products, yoghurts, mineral water and other food products. Beginning in the 70s, Nestl has continued to expand its product portfolio to include pet foods, pharmaceutical products and cosmetics too. Today, Nestl markets a great number of products, all with one thing in common: the high quality for which Nestl has become renowned throughout the world The Company's strategyisguidedbyseveralfundamentalprinciples.Nestl'sexisting products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for short-term performance. The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives. Taste of Nestl in each of the countries where Nestl sell products. Nestl is based on the principle of decentralization, which means each country is responsible for the efficient running of its business - including the recruitment of its staff.1 10. That's not to say that every operating company can do as it wishes. Headquarters involve sets the overall strategy and ensures that it is carried out. It's an approach that is best summed up as: 'centralize what you must, decentralize what you can'. Nestl is a company which is present in all over the world but It has difference and unique motto to deal in all over the world. Nestl believes that they should think about their organizations globally but they deal with people by interacting with them locally. Thinking globally - acting locally Evolution of Nestl: 1867 Henri Nestl founded the company in Vevey, Switzerland. 1898 Nestl purchases its first factory outside of Switzerland - Viking Milk factory in Norway. 1905 Nestl merges with Anglo-Swiss Condensed Milk Company. 1929 Nestl merges with Peter-Cailler-Kohler Chocolates Suisses S.A. 1938 Nestl launches Nescaf - the worlds first instant coffee. 1947 Nestl merges with Alimenting S.A. with the brand Maggi. 1962 Nestl purchases Findus. 1974 Nestl becomes a significant shareholder in the Cosmetics Company LOral. 1977 Nestl purchases Alcon, manufacturer of eye care products and kits. 1985 Nestl purchases the Food Company Carnation. 1988 Nestl purchases the confectionary company Row tree Mackintosh and the pasta company Buitoni-Perugina. 1992 Nestl purchases the mineral water Company Perrier. 1998 Nestl purchases Spillers pet foods business. 2000 Nestl sells the Findus brand in all countries except for Switzerland. 11. 2001 Nestl merges with Ralston Purina, the premier pet food company in North America, and with unique expertise in the dry dog food area.2VISION OF NESTLE Nestl's vision of making good food central to enjoying a good healthy life for consumers everywhere. This implies gaining a deeper understanding in many areas of nutrition and food research and transforming the scientific advances into applications for the company. Having a broad vision the 12. company is doing its best for their consumers to show the great sense of responsibility. Nestls aim is to meet the various needs of the consumer every day by marketing and selling food of a consistently high quality. The confidences that consumers have in our brands is a result of our companys man-y e ar s o f k n o w l e d g e i n ma r k e t i n g , r e s e a r c h a n d d e v e l o p me n t , a s w e l l a s c o n t i n u i t y - consumers relate to this and feel they can trust our products. High quality and collaboration Our objectives are to deliver the very best quality in everything we do, from primary p r o d u c e , c h o i c e o f s u p p l i e r s a n d t r a n s p or t , t o r e c i p e s a n d p a c k a g i n g ma t e r i a l s . O u r operations and collaboration in the Nordic countries gives us greater opportunities to be efficient and strategic and to function well as an organization, both when it comes to the distribution chain and to concentrating on joint product launches and campaigns.Focus on e-business and websites Increased investments in the sphere of e-business give us swifter business and direct contact with trade. Our website is a forum for consumers, students, future employees and the media. We hope that through a sincere approach and by conducting dialogues, we will be able to improve, change and satisfy the demands and wishes of the people of today3 13. NESTLE COMPANY As a nutrition, health and wellness company, Nestl, is committed to the enhancement of quality of life by helping communities in which it operates to meet basic and essential human needs. 14. Over the years Nestl has used its resources, skills and technology to help find solutions to the many socio-economic challenges facing communities. Many of the communities are confronted by challenges such as poor sanitation, lack of clean water, poverty, diseases, malnutrition, food security and many others. As a responsible corporate citizen, Nestl is deeply committed to its corporate social investment programmes which currently support more than a dozen projects. Nestl also partners with value-adding non-profit organizations to ensure that efforts are maximized to help improve the quality of life. Through its involvement and partnership with these nonprofit organizations over the years, Nestl has been able to make a positive contribution to various communities.BUSINESS PROFILE The Nestl Corporate Business Principles are at the basis of our companys culture, which has developed over the span of 140 years. Since Henri Nestl first developed his successful infant cereal Farine Lacte, we have built our business on the fundamental principle that to 15. have long-term success for our shareholders,we not only have tocomply with all applicable legal requirements and ensure that all our activities are sustainable, but additionally we have to create significant value for society. At Nestl we call this Creating Shared Value. Although our Nestl Corporate Business Principles were first published as an integrated document in 1998, most had already been established in individual form many years before. While the Business Principles are firmly established, they also continue to evolve and adapt to a changing world. For instance, Nestl incorporated all ten principles of the United Nations Global Compact soon after their creation and continues to implement them today. This latest revision differs from the previous two versions in that the ten principles of business operations are specifically linked to on-line copies of more detailed principles, policies, standards and guidelines. This has allowed the statement of each principle to be more succinct, whileproviding more detailedimplementing measures related to each one on the World Wide Web. Also, for the first time, a map of the principles and an overview of related company measures is included at the start of the document.We believe in the importance of a strong compliance culture that is fully embedded in our business. The Corporate Business Principles and the supporting documents reflect this commitment and thus protect the trust of our consumers and other stakeholders in the Nestl brand. Our internal rules not only require strict compliance with the law, they guide 16. our actions even if the law is more lenient or where there is no applicable law at all. For Nestl, upholding compliance goes beyond keeping checklists. It requires steadfast principles that apply across the whole Company, providing clear guidanceto our people As theChairman and the Chief Executive Officer of Nestl, we are committed to making sure that our entire Company is managed according to these principles and requireadherence to them from all our employeesaround the world. We are also committed to continuous improvement and are open to external engagement regarding any area of our Co The foundation for sustainability and Creating Shared Value corporate Business Principles. As Nestl is a principle-based company, the Nestl Corporate Business Principles form the foundation of all we do. Compliance with Nestl Corporate Business Principles, and with specific policies related to each principle, is non-negotiable for all employees and their application is monitored and regularly audited. As shown in the diagram below, compliancewith Nestl Corporate Business Principles isthefoundation for the Companys commitment to be environmentallysustainable and to create shared value. Creating Shared Value is the basic way we do business, which states that in order to create longterm value for shareholders, we have to create value for society. But we cannot be either environmentally sustainable or create shared value for 17. shareholders and society if we fail to comply with our Business Principles. At the same time, Creating Shared Value goes beyond compliance and sustainability. Any business that thinks long-term and follows sound business principles creates value for shareholders and for society through its activities, e.g. in terms of jobs for workers, taxes to support publicservices, and economic activity in general. ButCreating Shared Value goes one step further. A company consciously identifies areas of focus, where: a) shareholders interest and societys strongly intersect, and b) where value creation can be optimized for both. As a result, the company invests resources, both in terms of talent and capital, in those areas where the potential for joint value creation is the greatest, and seeks collaborative action with relevant stakeholders in society. The foundation for sustainability and Creating Shared Value CreatingShared Value Nutrition, Water,Rural DevelopmentSustainability Protect the Future Compliance with Nestl Corporate Business Principles, Laws, Codes of Conduct6 The Nestl Corporate Business Principles The ten principles of business. At Nestl, we have analyzed our value chain and determined that the areas of greatest potential for joint value optimization with society are Nutrition, Water and Rural Development. These activities are core to our business strategy and vital to the welfare of the people in the countries where we operate. We actively seek engagement and partnerships with outside stakeholders that optimize positive impact in these areas of focus. However, Creating Shared Value is not about philanthropy. It is about leveraging core activities and partnerships for the joint benefit of the people in the countries where we operate. In doing so, Nestl maintains 18. a very long-term perspective on business development and welcomes dialogue with external stakeholders who are committed to principled behavior and constructive engagement. This includes government and regulatoryauthorities, intergovernmental organizations,governmental organizations, academic and local communitiesQuality assurance and product safetynon-professional bodies, and 19. Everywhere in the world, the Nestl name represents a promise to the consumer that the product is safe and of high standard. Our commitment is never to compromise on the safety of any product. Our Quality Policy summarizes the essentials of our passion for excellence: To build trust by offering products and services that match consumer expectation and preference; To comply with all internal and external food safety, regulatory and quality requirements. Quality is everybodys commitment. We continuously challenge ourselves in order to constantly improve and achieve the highest levels of quality. We maintain the same high food safety standards in all countries in which we operate. We ensure the delivery of high quality products through our Quality Management System. Consumer communication 20. We are committed to responsible, reliable consumer communication that empowersconsumers to exercise their right to informed choice andpromotes healthier diets. We respect consumer privacy. Our core business strategy is built around helping consumers to have a balanced, healthier diet. The Nestl Consumer Communication Principles contain mandatory rules on marketing communication to all consumers, including accurate representation and portrayal of foods in a way that does not encourage over-consumption. In addition, specific principles guide our communication to children including no advertising or marketing activity to children under 6 years of age. Advertising to children from 6 to 12 years is restricted to productsthat meet predetermined nutritionalprofiling criteria, including clear limits on energy and health-sensitive ingredients such as sugars, salt, saturated fat and trans fatty acids. Our childrens communication principles are specifically aimed at protecting children by ensuring that the advertising is not misleading, does not undermine parental authority or generate unrealistic expectations of success, 21. create a sense of urgency or allude to a sense of low price. The Nestl Policy on Nutrition and Health Claims steers our actions related to scientifically supportable health claims. Please see The Nestl Consumer Communication Principles.Marketing of Infant FoodsWe are committed to supporting whatever is most suited for achieving the best start in life for babies. This means that we recommend breast feeding 22. over all other feeding alternatives. For those who need alternatives to breast feeding, our objective is to offer formula products that meet international standards for infant health in place of dangerous and inappropriate breast milk substitutes, such as whole milk. Our objective is also to offer cereals, baby foods and milks that contribute to optimal growth and development in place of complementary foods of low nutritional value often fed to infants.Leadership and personal responsibilityOur success is based on our people. We treat each other with respect and dignity and expect everyone to promote a sense of personal responsibility. We recruit competent and motivated people who respect our values, provide equal opportunities for their development and advancement, protect privacy and do not tolerate any form of harassment or discrimination.Nestl Management and Leadership Principlestheir 23. Our Management and Leadership Principles describe the culture and basic values we expect our employees to uphold, as well as the attributes needed to be successful in management and leadership. Our Code of Business Conduct specifies certain non-negotiable minimum standards in key areas of employee behaviour, including compliancewith laws, conflicts ofinterests, anti-trust and fair dealing, bribery, corruption discrimination and harassment, and integrity. We believe in the importance of free competition and are committed to acting with integrity in all situations. Please see The Nestl Code of Business Conduct at www.nestle.com/policies. Our Human Resources Policy specifies attitudes such as mutual respect, trust and transparencyin relating to one another and encourages opencommunication and cooperation. We also believe that our long-term success depends on our capacity to attract, develop, protect and retain the right and best employees. We respect international conventionsconcerningemployees rights, do not tolerate discrimination for reasons such as origin, nationality, religion, race, gender, age or sexual orientation or engage in any kind of verbal or physical harassment based on any of the above or any other reason.Safety and health at work 24. We are committed to preventing accidents, injuries and illness related to work, and to protect employees, contractors and others involved along the value chain. Our Policy on Safety and Health at Work establishes safety as a non-negotiable priorityof our culture. We recognize and require thateveryone play an active role in providing a safe and healthy environment, and promote awareness and knowledge of safety and health to employees, contractors and other peoplerelated to or impacted by our businessactivities by setting high standards We monitor our performance through the Nestl Occupational Safety and Health Management System to assure a safe and healthy workplace.Supplier and customer relations We require our suppliers, agents, subcontractors and their employees to demonstrate honesty,integrity and fairness, and to adhere to our non-negotiable standards. In the same way, we are committed to our own customers. The Nestl Supplier Code specifies minimum standards that we ask our suppliers, agents, subcontractors and their employees to respect and adhere to. The Supplier Code includes requirements such as business integrity, sustainable operating and agricultural practices, labour standards, safety, health and environmental practices. To ensure that the Supplier Code is put in practice, we reserve the right to verify the suppliers compliance with the Code on a regular basis.Agriculture and rural development 25. We contribute to improvements in agricultural production, the social and economic status of farmers, rural communities and in production systems to make them more environmentallysustainable. To ensure that ourfactories obtain raw materials competitively and at required quality and safety specifications we engage in developing sustainable agricultural practices and systems thatcontribute to long-term production efficiency,viable incomes forfarmers and the transfer of agricultural knowledge to suppliers; we support the application of new technologies and advances in agricultural science, including the opportunities offeredby bioscience when theirpositive effect on food safety, environment, agricultural practices and production efficiency are scientifically confirmed and accepted by consumers. The Sustainable Agriculture Initiative Nestl (SAIN) guides our engagement in farming systems to support agricultural practices, rural development, sourcing processes and practices that are sustainable over the long term. 26. Environmental sustainability We commit ourselves to environmentally sustainable business practices. At all stages of the product life cycle we strive to use natural resources efficiently, favor the use of sustainable managed renewable resources, and target zero waste. We invest continuously to improve our environmental performance.TheNestlPolicyonEnvironmentalSustainabilityincorporates the United Nations Global Compacts three guiding principles on environmentWe apply a product life cycle approachinvolving our partners from farm to consumer in order to minimize the environmental impact of our products and activities. Our four priorities areas are: water, agricultural raw materials, manufacturing and distribution of our products, and packaging. We implement our policy through the Nestl Environmental Management System. We believe that environmental performance is a shared responsibility and requires the cooperation of all parts of society. We are determined to continue providing leadership within our sphere of influence.Water We are committed to the sustainable use of water and continuous improvement in water management. We recognize that the world faces a growing water challenge and that responsible management of the worlds resources by all water users is an absolute necessity. Water is a particular area of focus for Nestl. The Nestl Commitments on Water set out our priorities and objectives on responsible water usage. These are to continue our efforts to reduce the amount of water used in our operations, ensure that activities respect local water resources, ensure that the water we 27. discharge into the environment is clean, engage with suppliers to promote water conservation, especially among farmers, and reach out to others on water conservation and access. Nestl is a founding signatory of the United Nations Global Compact CEO Water Mandate. We monitor and improve water efficiency through our water resources management specialists and in our factories with our environmental specialists in line with the Nestl Environmental Management System. We recognize the right of all people to have access to clean water to meet their basic needs.Pros 28. Nestle's culture is generally a very healthy one. The work environment is pleasant, supportive, and collaborative. Nestle seems to do a good job of consistently hiring good people; they are honest, nice people- solid citizens. There are very few morons or jerks to be found there. I always felt that I had a built-in network to tap into around the world... even to the point of knowing that, if I were traveling on vacation abroad, I'd be able to find someone (a Nestle person) who would help me if something went wrong. I always felt that I was part of something larger than myself- and an organization which adhered to high moral & ethical standards that I could be proud of. Cons It can be very difficult to find advancement opportunities, especially if you're not naturally skilled at self promotion. Nestle is not particularly good at recognizing it's employees' talents and providing the developmental opportunities to fully develop or leverage those talents. In such a large organization, it is also very easy to become "out of touch" with the outside business environment. Nestle can sometimes be "insular" in its thinking. It's also easy to get "too comfortable" there in your job and to develop a false sense of security. While some of the attraction for working at Nestle is the possibility for 29. exposure to international career opportunities, those tend to be made available only to a small percentage of employees.TRENDS IN ORGANIZATIONAL CHANGE Organizations have entered a new era characterized by rapid, dramatic and turbulent changes. The accelerated pace of change has transformed how work is performed by employees in diverse organizations. Change has truly become an inherent and integral part of organizational life. Several emerging trends are impacting organizational life. Of these emerging trends, five will be examined: globalization, diversity, flexibility, flat, and networks. These five emerging trends create tensions for organizational leaders and employees as they go through waves of changes in their organizations. These tensions present opportunities as well as threats, and if these tensions are not managed well, they will result in dysfunctional and dire organizational outcomes at the end of any change process. 30. GLOBALIZATIONOrganizations operate in a global economy that is characterized by greater and more intense competition, and at the same time, greater economic interdependence and collaboration. More products and services are being consumed outside of their country of origin than ever before as globalization brings about greater convergence in terms of consumer tastes and preferences. Yet at the same time, in the midst of greater convergence, there is the opposite force of divergence at work where companies have to adapt corporate and business strategies, marketing plans, and production efforts to local domestic markets. 31. To stay competitive, more organizations are embracing offshore outsourcing. Many functions are being shifted to India, the Philippines, Malaysia, andther countries for their low labor costs, high levels ofworkforce education, and technological advantages. According to the 20022003 Society for Human Resource Management (SHRM) Workplace Forecast, companies such as Ford, General Motors, and Nestle employ more people outside of their headquarters countries than within those countries. Almost any company, whether in manufacturing or services, can find some part of its work that can be done off site. Forrester Research projects that 3.3 million U.S. service- and knowledge-based jobs will be shipped overseas by the year 2015, 70 percent of which will move to India. Communication and information sharing are occurring across the globe in multiple languages and multiple cultures. Global competition and global cooperation coexist in the new world economy. One major consequence of globalization is greater mobility in international capital and labor markets. This creates a global marketplace where there is more opportunity, because there are more potential customers. However, there is also more competition, as local companies have to compete with foreign companies for customers. 32. According to Dani Rodrik, professor of international political economy at Harvard's Kennedy School of Government, the processes associated with the global integration of markets for goods, services, and capital have created two sources of tensions. First, reduced barriers to trade and investment accentuate the asymmetries between groups that can cross international borders, and those that cannot. In the first category are owners of capital, highly skilled workers, and many professionals. Unskilled and semiskilled workers and most middle managers belong in the second category. Second, globalization engenders conflicts within and between nations over domestic norms and the social institutions that embody them. As the technology for manufactured goods becomes standardized and diffused internationally, nations with very different sets of values, norms, institutions, and collective preferences begin to compete head on in markets for similar goods. Trade becomes contentious when it unleashes forces that undermine the norms implicit in local or domestic workplace practices. ChangeTrends and Tensions in Organizations Trends Tensions 1. Globalization Global versus Local 2. DiversityHeterogeneity versus Homogeneity3. FlexibilityFlexibility versus Stability4. FlatCentralization versus Decentralization5. NetworksInterdependence versus Independence 33. Professor Rodrik concluded that "the most serious challenge for the world economy in the years ahead lies in making globalization compatible with domestic social and political stability" (Rodrik 1997, p. 2). This implies ensuring that international economic integration does not lead to domestic social disintegration. Organizations that are confronted with this challenge will have to manage the tension created by the global integration versus local disintegration dilemma. The overall picture as a consequence of globalization is one of turbulence and uncertainty, in which a variety of contradictory processes present a wide range of both opportunities and threats that defy established ways of doing business and working in organizations. Integration and exclusion coexist uneasily side-by-side in organizations. For example, many apparent dichotomies or paradoxes competition versus collaboration, market forces versus state intervention, global actions versus local solutionsare losing their sharp edges as contradictory forces appear to converge and reinforce each other in organizations across the globe. Companies that compete fiercely in some markets form strategic alliances in others; government guidance and regulation are required to make markets work effectively; and "think globally, act locally" has been adopted as business strategy (or as a mantra) to deal with the challenges of doing business in the globalized economy. As organizations transform themselves to stay competitive, they will need to confront and resolve some, if not all, of these dichotomies or paradoxes. 34. On another level, because of globalization, the fates of people living and working in different parts of the world are becoming intertwined. Global events may have significant local impact. September 11, 2001 has been called the "day that changed the world". Heightened security concerns are changing expectations for people in organizations, and the role of organizations themselves. The threat of terrorism continues to be an ongoing concern worldwide. It has created a renewed focus on workplace security as employees experience a heightened sense of vulnerability in the workplace. Employee monitoring and screening are occurring more frequently. Concern over travel for business purposes is resulting in the increased use of alternate forms of communication such as teleconferencing and videoconferencing. DIVERSITY Globalization is impacting how organizations compete with each other. In combination with changing demographics, globalization is causing a rapid increase in diversity in organizations. Never before have people been required to work together with colleagues and customers from so many different cultures and countries. Diversity is moving American society away from "mass society" to "mosaic society". Organizations reflect this "mosaic society" in their more diverse workforce (in terms of not only race, ethnic or culture but also in terms of age, sexual orientation, and other demographic variables). More than ever, people have to interact and communicate with others who come from diverse backgrounds. This in turn has meant that 35. employees need new relational skills to succeed. An emerging stream of research in international management has called these new relational skills "cultural intelligence". Cultural intelligence is defined as the capability to adapt effectively across different national, organizational and professional cultures (Earley, Ang and Tan, 2005). More managers take up global work assignments in industries around the world. They learn how to work with people who not only think and communicate differently but also do things differently. Managers will need to develop their cultural intelligence to manage greater diversity in organizations. Diversity in organizations will continue to increase. As indicated by the U.S Census Bureau National Population Projections, the Hispanic population will increase by 11.2 percent between 2000 and 2025 to become the largest minority group in the United States. All other minority groups will increase by about 9 percent, while the number of Caucasians will decrease by approximately 19 percent. The world population is growing at a high rate in developing countries, while remaining stable or decreasing in the developed world. The result will be income inequities and economic opportunity leading to increased immigration and migration within and between nations. More temporary workers will be used for specific tasks, and there will be a greater demand for highly skilled workers. The aging American workforce population means more retirees and potential gaps in availability of experienced workers. According to American Association of Retired Persons (AARP), by 2015 nearly one in five U.S. workers will be age 55 or older. Retirees often want 36. to keep a foot in the workplace. AARP's research shows that nearly 8 of 10 baby boomers envision working part time after retirement; 5 percent anticipate working full time at a new job or career; only 16 percent foresee not working at all. People of different ethnic and cultural backgrounds possess different attitudes, values, and norms. Increasing cultural diversity in both public and private sector organizations focuses attention on the distinctions between ethnic and cultural groups in their attitudes and performance at work. This greater focus can result in the tension between finding similarities and accentuating differences in the face of greater diversity in organizations. There is an on-going debate between the heterogenists and the homogenists concerning the impact of greater diversity in organizations. The heterogenists contend that diverse or heterogeneous groups in organizations have performance advantages over homogeneous groups while thehomogenists take the opposing viewthat homogeneous groups are more advantageous than heterogeneous or diverse groups in organizations. According to the heterogenists, organizations with greater diversity have an advantage in attracting and retaining the best available human talent. The exceptional capabilities of women and minorities offer a rich labor pool for organizations to tap. When organizations attract, retain, and promote maximum utilization of people from diverse cultural backgrounds, they gain competitive advantage and sustain the highest quality of human resources. 37. Organizations with greater diversity can understand and penetrate wider and enhanced markets. Not only do these organizations embrace a diverse workforce internally, they are better suited to serve a diverse external clientele. Organizations with greater diversity also display higher creativity and innovation. Especially in research-oriented and high technology organizations, the array of talents provided by a gender- and ethnic-diverse organization becomes invaluable. Heterogeneous or diverse groups display better problem solving ability as they are more capable of avoiding the consequences of groupthink, compared to highly cohesive and homogeneous groups that are more susceptible to conformity. On the other hand, greater organizational diversity has its drawbacks. With the benefits of diversity come organizational costs. Too much diversity can lead to dysfunctional outcomes. Diversity increases ambiguity, complexity, and confusion. Organizations with greater diversity may have difficulty reaching consensus and implementing solutions. In many organizations, diversity can produce negative dynamics such as ethnocentrism, stereotyping and cultural clashes.The homogenists argue that homogeneous groups often outperform culturally diverse groups, especially where there is a serious communication problem. Cross-cultural training is necessary to enable culturally diverse groups to live up to their potential and overcome communication difficulties. The diversity movement, according to the homogenists, has the potential to polarize different social groups and harm productivity while breeding cynicism and resentment, heightening inter group frictions and tensions, and 38. lowering productivity, just the opposite of what managing diversity is intended to accomplish. The challenge therefore is for management to manage the tension produced by heterogeneity versus homogeneity. If properly managed, organizations can reap the benefits of greater diversity. Aside from proper management, organizations need to learn to appreciate and value diversity before the benefits of diversity can be fully realized. To achieve this, diversity training programs may help people in organizations understand and value diversity. FLEXIBILITY Globalization and diversity trends are forcing organizations to become more flexible and adaptable. To be able to function globally and to embrace diversity, leaders and employees in organizations have to become more flexible and develop a wider repertoire of skills and strategies in working with diverse groups of people in the workplace as well as in the marketplace. The response to increased diversity has, in many cases, been increased organizational flexibility. Some organizations allow workers to have very different work arrangements (e.g. flex-time) and payment schedules. Some organizations (and workers) have found it convenient to treat some workers as independent consultants rather than employees. In certain occupations, advancesincommunicationandinformationtechnologieshaveenabled telecommuting working at home via computer. One consequence of this is the blurring of boundaries between work and home, and where and 39. when work occurs. The benefits of greater flexibility may be countered by the negative consequences of working 24/7 including higher stress and burnout. The response to increased competition, however, has resulted in a tension generated by the demands to be flexible and yet maintain some stability as changes are implemented in organizations. To stay competitive, organizations are constantly changing and restructuring to increase flexibility and decrease costs. Business process reengineering, business process out-sourcing, job redesign, and other approaches to optimize business processes have been implemented to increase operational and process efficiency while reducing the costs of doing business. Changes in business and operational processes need time to stabilize for employees to learn the new processes, become familiar with them, and be able to operate effectivelyand efficiently.Yet,competitivepressurescancauseorganizations to go through a series of changes without giving employees adequate time for learning and training, and for the benefits of the change to be fully realized in the organization. This tension is well-captured by Columbia Business School professor Eric Abrahamson in his book, Change Without Pain (2004) in which he discussed how organizations can go through change overload and how employees can experience change fatigue and burnout. Professor Abrahamson proposes "creative recombination" as an alternative approach to the highly destructive, destabilizing and painful changes caused by "creative destruction". 40. FLAT In a greater competitive marketplace, speed or response time is critical. How organizations response to customers and other stakeholders or be the first to market may make a significant difference as time is at a premium. rganizations that can develop new technologies faster or can adapt to changes in the market faster are the ones that will survive the competition. To maximize response time, organizations have been flattening their hierarchies and structures, in addition to other initiatives such as downsizing and networking. Flat organizations make decisions more quickly because each person is closer to the ultimate decision-makers. There are fewer levels of management, and workers are empowered to make decisions. Decisionmaking becomes decentralized. However, flat organizations create a new tension between decentralization and centralization. Among the drivers of decentralization are communications technologies that allow companies to push decision-making away from the core. Proponents of decentralization emphasize the idea that less hierarchical organizations mirror the efficiencies of the networks that enable them: they are faster, more resilient, more responsive, more flexible and more innovative. Also, they argue, people who work within decentralized organizations feel empowered and energized. They do not need to focus on the chain of command and they do not feel constrained by it. 41. Organizations are caught between the opposing forces of centralization and decentralization. They want to leverage the opportunities offered by decentralization and create more nimble and forceful organizations, but they cannot always do so because the forces of centralization come into play. There are obvious benefits to centralization as control is comparatively tighter and accountability is clearer compared to a flatter, more decentralized organizational structure. Take the example of IT operations. The key to a centralized organization's success is its responsiveness. If the centralized operation can be responsive to the needs of the business, then that approach can make sense. Several companies, such as DaimlerChrysler and PepsiCo, have migrated back to centralizing IT operations after attempts at decentralization. The debate over the centralization versus decentralization of operations in organizations is an enduring one. It is an age-old battle of standardization versus autonomy, corporate efficiency versus local effectiveness and pressure on costs and resources versus accommodation of specific local needs. Vacillation between centralization and decentralization is both non-productive and unnecessary. Organizations, as they desire to become flatter, will need to be clear about how they need to respond to the tension between centralization and decentralization. 42. NETWORKS Organizations that flatten tend to encourage horizontal communication among workers. Rather than working through the organizational hierarchy, it is often faster for workers who need to coordinate with each other simply to communicate directly. Such organizations are highly networked. Another meaning of networked organizations refers to their relations to other organizations. Organizations that have downsized to just their core competencies must then outsource all the functions that used to be done inhouse. To avoid losing time and effort managing contracts with suppliers, organizations have learned to develop close ties to their suppliers so that social mechanisms of coordination replace legal mechanisms, which are slow and costly. In many industries, such as the garment industry in Italy, strong relationships have developed between manufacturers and suppliers (and other manufacturers), so that considerable work is done without a contract and without even working out a firm price. For these networked organizations to work, high trust and social capital between organizations are key elements. Networked organizations are particularly important in industries with complex products where technologies and customer needs change rapidly, such as in high technology industries. Close ties among a set of companies enables them to work with each other in ways that are faster than arms-length contracts would permit, and yet retains the flexibility of being able to drop the relationship if needed (as opposed to performing the function in-house). The trend towards networked organizations and 43. structures create a new tension between interdependence and independence. The forces of aggregation and desegregation throw up new challenges for organizations, for example, the use of independent contractors, joint ventures, strategic partnerships and alliances even with competitors. One advantage of networks is that organizations have greater flexibility and thus they can become more competitive in the global marketplace. Another advantage is that organizations do not require that many resources such as employee benefits, office space, and financing for new business ventures. On the other hand, networks have distinct disadvantages. Organizations may find it more difficult to control quality of goods or services as they now have to depend on their partners in the networks to deliver the quality that is desired. Legal and contracting expertise as well as negotiation expertise will also be important for networks. Alternative forms of control may need to be developed to control quality. Alternative mechanisms for coordination may also need to be developed to manage the growing constellation and sometimes tenuous nature of other partner organizations in the network. All the five trends and the tensions they produce result in greater organizational or system complexity for both leaders and employees in organizations. The tensions produced by these trends cannot be solved. 44. FINANCIAL REPORT OF NESTLE The Government continued with its strenuous efforts to steer the economy. With continued focus on reforms and a comb nation of stimulus packages, rural Income generation schemes and monetary policy amongst others the government was successful In keeping the GDP growth Largely on track especially when many parts of the word struggled on this front This past year highlighted the increasing complexity and volatility of the economic environment While the Government staking action and new food regulation is being put In place, faster Implementation could sustain the growth momentumAgainst this background, your companys success canbe measured on three dimensions - Growth inclusion. Leadership,YourCompany has always reiterated that good food Is essential for ensuring productivity and good life. With economic growth, the lifestyles in India ana evolving and changing People need to eat better and stay healthy to keep pace with their aspirations but the evolving scenario is complex On the one hand a very largo population does nothave access to affordablenutrition, and on the other hand there is an Increasing problem of diabetes, obesity and heart diseases, The need for better nutrition is a challenge across the income pyramid. Your Company has access to the Nestle Groups immense nutritional expertise and food technology for developing products that provide taste and science-based nutrition With strong consumer centric innovation and 45. Renovation supported by the Nestley R&D network, your Company remained focused on developing Indian concepts and relevant products that help people manage their need for taste and nutrition and enabled the Company to grow. Your Directors believe the Company remained sensitive to the need for following Itsefficient and sustainable utilization of resources andbasic approach to business to Create Shared Value. Itcontinued to inspire happiness for Its shareholders and the communities where Itoperates With the own sphere of activities your Companycontinued to utilize its expertise and knowledge and consciously implemented Initiatives to ensure that while its core business continued to grow, the impact of Its business on the communities, results In a better quality of life for them and is in their interest. Your Company continued to Invest resources both in terms of talent and capital Inthe areas of water, nutrition and ruraldevelopment because these are also the areas where shareholders interest and the interests of society strongly intersect and where your Company can create significant value for both, in an inclusive mannerThe factoriesInvested in state-of-the-art technology and equipment to process and add value to agricultural produce, worked closely with the farmers, suppliers and communities, transferring technology and upgrade the quality of their raw materials.knowledge to help them 46. Your Director* are pleased to inform that during 2010 your Company delivered a strong performance Net Sate for the year 2010 increased by 21 9% over the previous year Domestic Sales increased by 22.9% on Increased volumes and realizations, Export Sales increased by 7.6% Overall, the businesses continued to grow the market while retaining leadership in most businessesThe consistent performance of yourCompany over the years, reflects the strength of the brands, the trust in Its products and the strong support coming from Nestle Group, Switzerland It also demonstrates thecontinuous engagement and performance of thepeople and business partners. 47. Financial Results and Operations (Rs In Millions) 2010 Gross Revenue200962,97451f672Profit before Interest Impairment. contingencies and taxation Interest Impairment Loans on Fixed Assets (Net)11,646 119,610 14-103Provision for Contingencies (Net)164323Provision for Tax3,2642,620Net Profit8,1876,560Profit Brought Forward1,4251,001Balance Available for Appropriation9,6127,551Interim Dividends3,4713,471Final Dividend Proposed1,2051,205Corporate Dividend Tax772795Transfer to General Reserve6196553,3451,425Earnings per Share (Rs.)84.9167.94Dividend per Share (Rs )48.5048.50Surplus carried in Profit and Lose Account Key Rates 48. Total Income Net Profit for the Year 2010 increased by 25% The operating margins Improved due to better absorption of fixed cost end Improved product / channel mix- The Impact of Increase In cost of materials was largely offset by the one-off Cost In 2009 relating to actuarial losses on retirement benefits The improvement in FIXED ASSETS Net Profit Margin is due to the Increase In operating margin as the effect of lowering income tax rates has been offset by tower contribution of the income tax SHAREHOLDERS FUNDS holiday at Pantnagar factory Your Company continued to emphasize on cash generation and delivered strong operating cash flow during the year. Surplus Funds have been prudently invested after ensuring that such nvestments satisfy the Companys criteria of safety. Liquidity end returns. Cash Flow The Company supplemented the Provision for Contingencies with further amount of Rs 184 million (net) for contingencies resulting mainly from issues, which are under litigation/dispute and other uncertainties requiring management judgment This was after the reversal/utilizationof Rs 250million provision, due to settlement of certain disputes for which provision was no longer required While the current year has also commenced as per plan, the beginning has been with a number of uncertainties. Including the Intensity of 49. cost Increases specially the volatile raw material prices. Your Company will focus efforts to overcome these challenges and is hopeful that the Government would continue to support the food processing sector. Your Directors are confident of the long-term business prospects of the Company. Exports During the year, Export Sales at Rs 3,537 million was higher by 7 6%. At constant exchange raise the same would be 10.3%.The Increase inexports was largely on account of new exports of Coffee to South Africa and Egypt which wore started during the year There was also a significant Increase in exports of instant Tee to certain European markets and to the Far East and a broadened customer base has now been established This was offset by the discontinuation of exports of Infant nutribon products to Sri Lanka and Bangladesh due to capacity constraints, and the Lower exports of cuinary products.Your Company continued Rs efforts to develop moreproducts for the Indian athnic community abroad and certain new products were shipped out during the year. Some new grades of instant Tea have also been developed and these will add variety and value to the portfolio. 50. Dividends The Board of Directors has recommended a final dividend of Rs. 12.50 per equity share of the face value of Rs. 10/- each for the year 2010, amounting to Rs, 1,205 Million. This is in addition to the two Interim Dividends for 2010, aggregating to Rs 36.00 per equity share, paid in May 2010 end November 2010 (amounting to Rs 3,471 million) The total dividend payout for 2010 would be Rs. 4,676 million (excluding the corporate dividend tax), and maintain the total dividend payout for 2009, and is in keeping with the financing needs for capital expenditure Business Development India is evolving rapidly and people are becoming more health conscious and eat bettor. Nutrition plays a key role In enhancing Health and Wellness in our lives and India will be challenged by the need for better nutrition across the income pyramid Your Company intends to play a definitave role in providing consumers with Good Food, Good Life Nestle products are trusted for their high quality and this drives your Company to Innovate and renovate products to further strengthen its bonds with consumers. 51. The business of Prepared Dishes and Coolding Aids grow rapidly MAGGI continued to strengthen its wide portfolio at an accelerated pace. Being one of the top Most Trusted Food Brands in the country, MAGGI has gone beyond offering products, to building emotional relationships with consumers. MAGGI products provide Taste and Health and bring Happiness to every home, delivering Taste Bhi Health Bhi Khushiyan Bhi. With the support of Nestley global network of R&D centres applying knowledge in science based nutrition. MAGGI products were innovated and renovated In accordance with the changing needs of all members of the family During the year, an Innovative range of Me & Meri MAGGI testes were introduced In Noodles. The Me & Man MAGGI campaign started in 2009. to celebrate 25 years of the emotional relationship of MAGGI wtth Its consumers The overwhelming response to the campaign brought out some very distinct experiences and emotions that consumers associate with MAGGI, and the culinaryexperts worked extensively on concepts that capture theseexperiences In the taste of the Noodles. Three flavour launched were Me & Meri THRILLIN CURRY. Me & Meri TRICKY TOMATO and Me & Meri ROMANTICCAPSICA Soon after. MAGGI Vegetable MultigralnzNoodles was raited outMAGGI Vegetable Multigralnz Noodles is acombination of traditional Ingredients, known for their goodness, such as Ragi, Com, Jowar. And Wheat with real vegetables, and are a source of Fibre, Calcium andProtein MAGGI Masala-ac-Magic and MAGGINUTRI-LICIOUS PAZZTA launched in Late 2009 established themselves during the last year MAGGI 52. NLTRI-LICIOUS PAZZTA is already the market leader and continues to grow the market for light meals MAGGI Masala-ac-Magic, fortifed with Iron, Iodine end Vitamin A, is helping housewives In kitchens across the income pyramid, to provide tasty and nutritious food to their families everyday. MAGGI continued to connect with consumers. In innovative and Impactful ways MAGGI Sauces advertising acknowledged the increasing stress onconsumers and advocated Hasaon, Khushi Phaolao lndia koHeatthy Banaol It promoted happiness and spontaneous joy for a healthy living and encouraged a dialogue with the consumer. The campaign for MAGGIVegetable Multigralnz Noodles revived another dimension Inconsumers lives. It brought alive the strong emotional bonds within the family and rested the multi-benefits of MAGGI Multigralnz to the multibenefits In every motherl Marketing Taste Bhi Health Bhi solutions to consumers at the bottom of the pyramid has its own challenges These are Inherent in the lifestyle of these consumers that is driven by traditional values, lack of education and limited affordabillty. While the solutions have to be affordable, most people may lack the basic understanding of nutrition Since MAGGI Masala-ae-Magic is an affordable product that even low income families can use, the challenge Is to spread nutrition education. Starting out with the first programme in Dharavi in Mumbai, MAGGI has been sending out people to Increase nutrition awareness In association with a social organisation Drishtee it is also organising heath camps in rural areas. These camps create awareness, amongst others, about micronutrient deficiencies, while the organisation also develops retail entrepreneurs for products like MAGGI Masala-ae- Magic With all these Initiatives, MAGGI continued to beranked as the No. 1 Most valuable Food Brand1 and 53. amongst the Top 10 Buzziest Brands; in the countryThe Chocolate andConfectionery business continued to drive growth in the newer segments that are more relevant to emerging consumer needsand wellnesspreferences. Driven primarily by better understanding of consumers and extending the portfolio innovatively your Companyschocolate andconfectionery business has grown faster than Industry. White the overal penetration for the chocolate category is still in single digits and has a long way to go, the consumption is impulse led and driven largely by convenient price points. As economic growth creates more disposable income with more people the consumption is expected to increase. The challenge is to manage the correct colnagefor these products man Inflationaryenviornment. Your Company has grown this business steadily and it is now the leader in the chocolaty water segment for lighter eating1 with NESTLE KIT KAT and NESTLE MUNCH and Whites (goodness of milk) with NESTLE MILKYBAR, During the year this business continued to Innovate and renovate brands to increase relevance to the consumers Some of the more recent and successful launches were NESTLE MILKYBAR Choo Choko at Rs.5/- NESTLE MILKY BAR Crispy at Rs.5/- NESTLE MUNCH Guru pack at Rs.10/- and NESTLE KIT KAT single finger at Rs 5/-. During the year your Company re-launched NESTLE BARONE Rigorous work with the R&D Centres has enabled us to develop taste superiority in NESTLE BARONE, which is supported by consumer research It was re-launched as the companion for the confident young Indian and the re-launch campaign goes beyond the product benefit to strengthen the 54. emotional experience of the consumer NESTLE BARONE is available at price points of Rs 5/- and Rs 10/-. and this new thrust is further strengthened by revamped packaging which is fresh, youthful and premium. Your Company continues to believe that sweet snacking is an Intrinsic part of peoples lives and with in this category the commitment is to offer teste as well as balance to consumers. The NESTLE KIT KAT squirrels communication is an Illustration of this where it Innovatively brings alive the importance of breaks in routine. In the sugar sub-segment your company continued to focus on the two need states of indulgence and refreshment with success While it grew the overall Eclairs portfolio to make your Company the largest player, volume gains by NESTLE POLO has now made your Company the biggest NESTLE POLO market In the world. Your Company is the value leader in Instant Coffee with NESCAFE. During the year, the Coffee and Beverages business not only strengthened Its market position but also strengthened its bonding with consumers. The business continued to focus its efforts on the value chain and leveraged Nestles world class proprietary aroma recovery technology to Improve the aroma and taste of NESCAFE CLASSIC.furtherNESCAFE is abrand with a progressive world view and reflects the thinking that we can reach our destination when we have a sense of purpose it talks to the youth of todays progressive India and sees the world as they see it During the year it engaged with consumers with theSimple message Switch on yourpurpose. Switch on the best In you Thebusiness associated with thesuccessful and vibrant Deepika Padukone as the brand ambassador and to further engage with the youth, a digital page Know your neighbours was created. This page is today the biggest fan page for NESCAFE in the world 55. with more than three and a half lakh fans, and is continuing to grow These initiatives along with the onesalready planned are expected to moveNESCAFE to a new growth trajectory. During the year Milk Products and Nutrition- business performed well and continued to consolidate and grow. Science based renovationsnutrition, stringent quality standards end innovation and are strong pillars for the business which is focused onenhancing the quality of life During the year your Company launched the NESTLE START HEALTHY STAY HEALTHY educational initiative in partnership with doctors, with the aim of making good nutrition a way of life. It emphasizes the fact that the nutrition that children get in the early years of life can affect their health forever. And It all starts with mothers milk. As we progress through different stages of life, we have different nutritional needs and we need to understand and balance our nutritional requirements to stay healthy. While your Company actively supports and promotes breastfeeding as being the best possible source of nutrition for the developing Infant it recognizes that there arecircumstances where themother to unable to feed Your Company continued to build on the heritage that Nestle has of quality. trust and science based nutrition to meet the needs of infants, as they grow up, and in later life. NESLAC Nutritious Milk Drink for children was launched towards the end of the year in select geographies Your Company has a portfolio of high quality UHT milks that pass stringent quality checks and are preferred by discerning consumers who demand the confidence of good taste and putty. The range comprises NESTLE MILK (Rich and Creamy). NESTLE MILK (Half Fat) and NESTLE SLIM 56. [Skimmed Milk], and NESTLE PRO-HEART MILK with Omega 3 Your Company continued to strengthen the business and also extended the range ofNESTLE DAHl to include dahi in pouches. In the dairy whitenercategoryNESTLE EVERYDAY continued to leed volume and valuegrowth and introduced affordable price formats to Improve accessibility for lower income users. The brand was renovated and research shows that 8 out of every 10 consumers prefer NESTLE EVERYDAY making it Indias most preferred Dairy Whitener During the year there was greater emphasis on activations and sampling to bring the brand experience closer to consumers MILKMAID sweetened condensed milk has in the pastsuccessfullyintroduced a new generation of home cooks to easy 3 step recipes. Your Company continued to strengthen this activity and scale-up business The Healthcare Nutrition Business that was acquired from Specially Foods India Private Limited, with products for consumers with special nutritional requirements performed satisfactorily Work to underway todevelop ftfurther. The products In this portfolio are marketed underbrands likeRESOURCE, OPTIFAST and SPERT. RESOURCE is specially formulated for the management of malnutrition and other medical conditions associated with increased nutritional needs. It has a range of formulations Including, amongst others, RESOURCE Diabetic, a ready to use, fibre rich diet for better nutritional management of diabetics and RESOURCE High Protein that provides easily digestible whey protein. OPTIFAST is a Nutrition supplement In overweight condition and SPERT is a Protein supplement to address the Increased protein needs of the fanny With mom women entering the workforce and Increasing disposableIncomes, there la growingopportunity In the Out or Home segment Your Company is well placed to 57. tap this During the year as the economic environment Improved and hiring by corporates Increased the businesswas positively benefited YourCompany successfully launched vending machines taking into account the specific needs of the customers in the large as well as small establishments. Sales Your Company is aware that the emerging and the Increasing competitive Intensity, requires us to be even more efficient, as we go forward. The process of back- end sales automation that was initiated earlier is now, fully implemented and provides a robust and integrated distributor management solution that supports our efficiency In primary and secondary sales This also facilitates a more transparent record of the transactions from distributors, to retailers We strive to improve theavailability of ourproducts with a clear focus on building distributon by going deep & wide across urban and rural geographies This has resulted In Improving our reach to more than 400,000 outlets In the last year alone Your Company Is committed to continuous excellence in the operations. During the year the focus was on building capacity through the wiling and able distributors who are long term partners of your Company, and provided the front lino field force, the support and know-how to improve their capability. 58. Technology and Quality Your Companys products touch the lives of millions every day and Nestle is amongst the most trusted companies in India. The commitment to high integrity Nestle products is supported by stringent quality assurance norms, state-of-the-art technology and high degree ofautomation Theaccess to Nestles globel R&D and emphasis on science based innovation and renovation to develop high quality products are significant competitive advantages Your Company Is also working on a robust and comprehensive Improvement programme Nestle ContinuousExcellence (NCE) that isbased on LEAN mindset for war on waste andTotal PerformanceManagement concepts The initial results from prior areas Indicated that bettor efficiencies have been achieved from the same assets while also reducing costs Nestle R&D Centre in India Your Directors are extremely pleased to inform that at the request of your Company, Nestle S. A. Switzerland has agreed to the setting up of a R&D Centre In India as a part of its global network of R&DCentres Nestle R&D Centre India Pvt Ltd. Is a wholly owned subsidiary of Nestle S A and at the request of your Company, the RAD facility has beenlocated In theproximity of your Companys Head Office The foundation stone for the R&D Centre was laid by the Honble Minister for FoodProcessingIndustries In September, 2010 and It is expected to be operational in 2012. 59. Nestles decision to establish an R&D centre In India will be an additional competitive advantage in the future and well further strengthen the benefits of technology and know-how received by yourCompany from NestleGroup. The research at this Centre will provide exerting opportunities for Innovation and will focus on PopularlyPositioned Products (PPPe),especially for India but also worldwide PPPs meet the specific needs of consumers with lower income levels by nutritionally enhanced products at accelerate your Companys growthoffering them high-quality,affordable prices it should help to and contribute towards reducingnutritional deficiencies in lndia. Environment Your Company is sensitive to the fragility of non- renewable resources and continues to work towards creating and Increasing awareness for environmental sustainability Emphasis on conservation of resources is a priority within the factories and in the manageable areas there is a continuous effort to minimize consumption of natural resources and reduce waste and emission. while maximizing production All processes follow the Nestle Environment Management System and business practices comply with government policies, environmental laws and regulations using stateof-the-art technology and equipment You writ bo proud to know that as production volume has been increasing, during the past ten years, there has been a significant reduction in usage of energy and water and reduction in emission of green house gases per tonne of production Water consumption 60. per tonne of production has reduced substantially and water use efficiency has improved by almost 60% byemploying efficient methods andtechnologies Energy consumption per tonne of produce has reduced by almost 51% through investments in energy efficient systems and processes and cutting down on energy losses At the same time waste water discharge per tonne of produce reduced by almost 70% as a result of the reusing of water and more efficient processes that reduce water DMA The carbon footprint has been significantly reducing through focus on technologies that improve combustion and emphasis on utilising renewable fuels such as coconut shells and process waste to replace non-renewable fuels Capacity and Funding Your Company has boon growing at a healthy rate In recent years with continuing Leadership across its businesses. This market leadership position and Indias positive economic environment coupled with a progressive population provides opportunities for growth Your Company is therefore, accelerating Investment in capacities to provide consumers a wide product range, from Popularty Positioned Products far low income consumers to premium offerings In the recent past somesignificantinvestments have already been initiated Your Directors are hopeful that the Government continues to support the Food Processing Sector so that your Company can continue to expand manufacturing andemployment toprovide consumers with affordable products Over the Last three years, Nestle India has spent over Rs 650 crones In capital Investments, but the Investments during 2010 atone were In excess of Rs480 crores and 61. additional commitments of around Rs 680 crores already existed at the year end. Current plans foreses a further acceleration in 2011 and beyond This capital expenditure will go into expanding facilities at Bhichogm, Moga, Nanjangud, Porda, Samakha and in new Greenfield fecilities while a new plant for MAGGl products is gettingready for commissioning at theNanjangud Factory, work has been initiated for a green field project at Tahliwal In Himachal Pradesh In order to finance this accelerated capital expenditure trajectoryyour Company would have a Judicious mix ofInternal Accruals and Debt The Borrowings Free balance sheet of your Company and thestrong credit ratings of Nestle should facilitate thisstrategy Your Directors are pleased that the Reserve Bank of India has approved availment of External Commercial Borrowing from the foreign equity holders of upto US$ 450 million for the sourcing of capital goods, expansion/modernisation of facilities and new projects. The drawdown of the loan would be based on the funding requirements from time to time Supply ChainThe current volatile and complex economic environmentrequires efficient and cost effective processes. During 2010 your Company has ensured timely and efficient supply of materials to run the factories, according the development of local suppliers The distribution of finished goods to consumers across the country continues to be cost effective and mora environmental friendly with Increasing share of rail deliveries. During the year, your Company also delivered sustainable coat optimisation Initiatives as part of Nestle Continuous Excellence (NCE) to eliminate waste and manage input coils This year the NCE programme will be expanded further to cover all supply chain processes and select distribution centres. 62. In line with the philosophy of Greeting Shared Value, Nestle India rolled out Its Responsible Sourcing programme in 2010. All the key vendors were engaged on this initiative through procurement tod vendor meets at the Companys Head office and factories Vendors were supported through a preassessment process, consultant visits, dedicated help desk and continuous engagement and education AH vendors were registered on the SEDEX platform and Independent Audits by internationally approved agendas were conducted on the key vendors shortlisted A thesevendors were foundcomplaint with minor gape for which road maps have been agreed mutually Human Resources and Trade Relations Your Company strongly believes that people are its assets and they are key to drive competitive advantage With the vision given to employees to Seek the Peak in all endeavors, the emphasis has been on alignment of company goals with individual objectives and than empowering employees to give their beat with the mindset of Dream DareDeliver, Recognizing theimportance of Human Resources, an effortshave been put by yourCompany to ensure that best talent is recruited, continuously developed and retained During the year, your Company hasput heavy emphasis onperformance driven culture and appropriate HR tools and processes have been deployed to ensure clear linkage with rewards. Strong recognition platforms have been crested to encourage people to deliver stretched goals. There has been a lot of emphasis on training and development including self learning, manager inspired development opportunities.learning through coaching and censer 63. All these efforts have ensured that your Company retains Its position as a preferred employer and an employer of choice. Your Company believes in fostering trust end mutual respect In employee rotations Your Company engaged employees with trust and respect by continuously transparently sharing Information through various forums, dialogues andothercommunication means. These efforts have received excellent redprocation from employees and in its Industrial Relations. SWOT Analysis of the Company Strengths: * Being NESTLE * General Licence Agreement which gives access to the Nestle Groups proprietary technology/ brands, expertise and the extensive centralised Research and Development facilities * High quality and safe food products at affordable prices, and trust in Nestle. * Understanding of Nutrition, Health and Wellness * Strong end well differentiated brands with market share leadership. * Product innovation and renovation, based on consumer insights. * Well diversified product portfolio across categories and income Strata * Efficient supply chain 64. * Responsive Organisation Structure and strong Management Team * Distribution structure that allows wide reach and coverage in the target markets. * Capable and engaged human resources * Participation in Global Business Excellence (GLOBE) * Strong financial position Weakness: * Complex supply chain configuration. * Cascading indirect taxes. * Price point portfolio Threat: * Price volatility of key raw, packaging materials and fuels * Availability of agro based commodities * Food Inflation * While-collar talent Opportunity*: * Potential for further expansion In smaller towns and other geographies * Growing demand for premium products * Introduction of GST to simply the taxation and distribution * Recovery of Our of Home Segment * Leverage Nestle Technology to cave op more products that provide Nutrition. Health and Wellness at affordable prices Working with Communities 65. Evan as growth and soda! change accelerate the desire to move up the income pyramid, the issues of rural development, conservation of water and environmental resources, access to nutrition and food security are potential challenges Your Company believes that our response to these common issues will not only have a bearing on our own progress but also the ability to create sustainable inclusive growthNestles approach to business isCreating Shared Value or Saajhapan as we call it in Nestle India and it la about the impact of our business and engagement through it In colloquial thinking Saanjhapan refects joint benefit Your company is focused on the three ansae of Nutrition, Water and Rural Development where it has the greatest potential for Joint value with the communities. Understanding of nutrition, knowledge of balanced diets and access togood nutrition isessential for a good life in a survey conducted by your Company around Its factories in 2009 lack of knowledge and even awareness about balanced nutrition had emerged as a major concern Your Company has expertise and understanding of nutrition and Intends to use this to help people Improve the quality of their lives. It has developed a simple but engaging programme In partnership with Universities that have knowledge of food habits and availability in their areas The programme modules are structured in a way that students absorb the basic knowledge relating to foods In a practical manner it helps them understand the role of food in our bodies, the manner in which food is digested and how we can improve the balance of nutrients in diet The module specifically devotes time to explaining how cooking practices can improve nutrition, as well as the need for food hygiene, sanitation, and physical exercise to imp rove health and wellnessThisprogramme was rolled out nationally from April and during the year around 66. 5000 students in village schools have already participated The Universities also help to ensure that the programme Is being implemented in the beat interest of the community. The well being of the communities from where we draw our agricultural raw materials are important for us. Consequently your Companycontinues to do extensive work with fanners and othersuppliers, transferring technology and knowledge to the communities and helpingthem build their capabilities so that they can participate moreeffectively in business and build on progress through economic prosperity. During the year your Company continued to extend its Clean Drinking Water Projects that Improve access to dean drinking water in village schools and increase awareness for water conservation in the communities around our factories During the year, 17 Clean Drinking Water Projects were constructed to benefit 6300 more students, As a result the number of these projects around our factories has increased to 156 and 66,000 students in village school are directly benefiting every year Your Company has been working extensively to develop dairy fanning and to make It a sustainable income source even for small and marginal farmers, This effort continued in the Moga region with your companys veterinarians and agronomists providing support, expertise and knowledge that benefits over 110,000 farmers directly Your Company also continued with the Village Women Dairy Development Programmes that train them in good dairy practices as well as spread awareness about personal hearth, hygiene, water conservation and economic independence.160 moreprogrammes helped to reach out to 5300 additional women during the year, cumulatively benefitting over 45,000 village women During recent years your Company has also been working with chicory farmers Transfer of 67. technology, education and better knowledge of roasting and processing has increased yields and quality During the past 10 years the number of chicory farmers benefitting from this has increased from 1000 to 7500 Contribution to Exchequer Your Company has been a leading taxpayer of the country and over the years has been enabling significant contribute to various taxes During the year 2010, the Company through Its business, enabled tax collections at Central and State Law of close to Rs 13.98 billion in the aggregate Awards and Recognitions While your Companys products continued to be trusted for their high quality, your Company has Increasingly emphasized better consumer engagement The success is reflecting in the awards and recognitions that your brands received during the year They are also a strong indication of the hard work and sustainable initiatives beingimplemented to delightconsumers. Soma of the key awards and recognitions: * Conferred Marketing Company of the Year award at PITCH Indias Top 50 Marketers Awards 2010 to recognise excellence in Marketing* PitchMagazine recognised MAGGI amongst the top 3 Ageless Brandsandadjudged MAGGI Masala-ae-Magic amongst the top 3 for innovative work at the Bottom of the Pyramid. * NESTEA Voted Product of the Year In the powdered beverages category by Nielsens Consumer Survey of product innovation 2010. * KIT KAT adjudged Master Brand by the World Brand Congress 68. * MAGGI Masala-ae-Magic; recognised amongst The Chartbusters of 2010 by The Economic Times * NESCAFE Know Your Neighbours campaign amongst Top 5 Most Liked Digital Campaigns of 2010 listing by AFAQS * MAGGI again rated the No 1 Food Brand in India by an ICMR consumer study. * Me and Med MAGGI campaign recognised by Campaign India Digital Media Awards - Silver for Best Website (FMCG) and Bronze for Beet Loyally Campaign. * MAGGI rated amongst Indias Top 10 Buzziest Brands by AFAQS Survey 2010 * Me and Mart MAGGI advertising campaign received Silver and Bronze Awards at 2010 ABBYS, * Coffee Board Awards for Best Exporter of Coffee to Russia and C S. and Second Best Exporter of instant Coffee (2009-2010) * In a survey by Business Today and indicus Analytics to understand external perceptions Nestle India amongst the section toppers for FMCG on Best Companies to Work for 2010. Directors Responsibility Statement Pursuant to Section 217(2AA) of the Companies Act. 1956, the Directors confirm that * In the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same; * They have selected such accounting policies and applied them 69. consistently and made Judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits for that period; * They have taken proper and sufficient care for the maintenance of adequate accounting records In accordance with the provisions of the Companies Act 1956 for safeguarding tho assets of the Company and tor preventing and detecting fraud end other irregularities. * They have prepared the annual accounts on a going concern basis. Corporate Governance In compliance with the requirements of Clause 49 of the Listing Agreement with the Stock Exchange, a separate report on Corporate Governance along with Auditors certificate on Its compliance is attached as Annexure to this Report. Cautionary Statement Statements in this Report, particularly those which relate to Management Discussion and Analysis as explained in the Corporate Governance Report. describing the Companys objectives, projections, estimates and expectations may constitute forward looking statements within the meaning of applicable laws and regulations Actual results might differ materially from those either expressed or Implied In the statement depending on the circumstances Directors Mr Rajendra S Pawar resigned as a Director of the Company with effect from 22nd April 2010. The Directors wish to place on record their appreciation for the contributions made by Mr Pawar during his tenure; 70. Dr. Rakesh Mohan, appointed in the casual vacancy. is currently Professor in the Practice of international Economics and Finance at the School of Management and Senior Fellow in the Jeckson Institute for Gobal Affairs at Yale University He is also Non Resident SeniorResearch fellow ofStanford Centre for international Development, Stanford University He has been Deputy Governor of the Reserve Bank of India for many years (20052009 and 2002-2004) and held senior positions In the Government of India Including Secretary, Department of Economic Affairs (2004-2005) as well as Chief Economic Advisor to theGovernment of Ends (2001-2002),Director General of National Council for Applied Economic Research, and Chief Executive of Indian Council for Research and international Economic Rotations Dr Mohan is well known and respected internationally for his extensive work in the areasof economic reforms and liberalization.Industrial economics, urban economics, Infrastructure studies, economic regulation, monetary policy and the financial sector His experience would be of Immense benefit to your Company and adds a valuable perspective in the Board of Director Dr Rakesh Mohan holds office till the Annual General Meeting and is eligible for re-appointment. Trade Relations The Company maintained healthy cordial and harmonious Industrial relations at all levels Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the fore front of the Industry Your Company continued to receive cooperation and unstinted support from the distributors, retailers, stockists, 71. suppliers and others associated with the Company as Its trading partners The Directors wish to place on record their appreciation to the same and your Company will continue in Its endeavor to build end nurture strong links with trade, based on mutuality. respect and co-operation with each other and consistent with consumer interest. Appreciation Your Company has been able to operate efficiently because of the culture of professionalism, creativity integrity and continuous improvement in all functions and areas as well as the efficient utilization of the Companys resources for sustainable and profitable growth The Directors wish hereby to place on record their appreciation of the efficient and loyal services rendered by each and every employee, without whose whole-hearted efforts, the overall very satisfactory performance would not have been possible Your Directors look forward to the future with confidence 72. CONSUMER PREFERENCE All marketing starts with the consumer. So consumer is a very importantpersontomarketer.Consumerdecideswhattopurchase, for whom to purchase, why to purchase, from where to purchase, and how much to purchase. In order to become a successful marketer, he must know the liking or disliking of the customers. He must also know the time and the quantity of goods and services, a consumer may purchase, so that he may store the goods or provide the services according to the likings of the consumers. Gone are the days when the concept of market was let the buyers beware or when the market w a s m a i n l y t h e s e l l e r s m a r k e t . N o w t h e w h o l e c o n c e p t o f c o n s u m e r s s o v e r e i g n t y prevails. The manufacturers produce and the sellers sell whatever the consumer likes. In this sense, consumer is the supreme in the market. As consumers, we play a very vital role in the health of the economy local, national or international.Thedecisionwemakeconcerningourconsumption behavior affect the d e m a n d f o r t h e b a s i c r a w materials, for the transportation, for the banking, for t h e production; they effect the employment of workers and deployment of resources and success of some industries and failures of others. 73. Preference (or "taste") is a concept, used in the social, particularly economics. It assumes a real or imagined "choice" between alternatives and the possibility of rank ordering of these alternatives, based unhappiness, satisfaction, gratification, enjoyment, utility they provide. More generally, it can be seen as a source of motivation. In cognitive sciences, individual preferences enable choice of objectives/goals. The study of the consumer preference not only focuses on how and why consumers make buying decision,butalsofocuseson howand whyconsumersmake choice of the goods they buy and their evaluation of these goods after use. So for success of any company or product promotion it is verynecessaryconsumer preference.todepartitsconcentrationtowards 74. BIBLIOGRAPHY NESTLE INTERNET TEACHER